Nigerians pay ₦3.8 for every ₦10 worth of electricity supplied

Nigerians pay only about ₦3.8 for every ₦10 worth of electricity received from electricity distribution companies (DisCos) while ₦2.20 of every ₦10 worth of electricity is lost to technical constraints and energy theft indicating that only ₦4 returns to companies that produce power in the country, according to a report by the electricity regulator.

 

In its 2018 first quarter report, the Nigerian Electricity Regulatory Commission (NERC), blamed this situation on non-cost-reflective tariff and customers’ apathy.

 

“Financial illiquidity remains the most significant challenge affecting the industry’s sustainability. This serious liquidity challenge is partly attributed to non-cost-reflective tariffs, and high technical and commercial losses aggravated by consumers’ apathy to payment arising from estimated billing and poor quality of supply in most load centres,” the report.

 

According to NERC, the level of billing efficiency during this quarter and the one prior to it, shows that for every 10kWh of energy received by a DisCo from the Transmission Service Provider (TSP), approximately 2.2kWh is lost due to technical constraint and energy theft. In other words, for every ₦10 worth of electricity received by DisCos, ₦2.20 is lost due to poor distribution infrastructure and energy theft.

 

NERC said this has resulted in a situation where “Out of the ₦171.1billion billed to customers in the first quarter of 2018, only ₦106.6billion was recovered, representing 62.3% collection efficiency. Therefore, out of every ₦10 worth of electricity sold during the quarter under review, ₦3.8 is uncollected.”

Consumers however, have expressed frustration over estimated billing. And 59 percent of all complaints received were on estimated billing. This is because “out of the 8,135,730 registered electricity customers, only 3,434,003 (42%) have been metered. Thus, 58% of end-use customers are still on estimated billing,” NERC said.

 

DisCos have always argued that the current tariff they are compelled to charge does not accurately reflect the change in the cost of inputs that constitute the tariff.

 

Chuks Nwani, energy lawyer and vice president of PowerHouse International, an energy consultancy said: “The prevailing Disco tariff today was modelled against variables that have been overtaken by time and events and therefore does not reflect the true pricing of electricity. MYTO 2015 for Discos were built on 196/$1, 8.3% inflation rate, certain available capacity and therefore the final tariff was a product of this variables,”

 

“You recall that from late 2015 there were changes in these variables which would require reciprocal adjustment of the tariff but the government did not allow NERC to increase the tariff to meet up with the current realities. The shortfall that the Discos could not account for becomes a debt for the market which the government is under obligation to pay since it is at their instance that the tariff was not increased,”

 

“This is why the government has to fully implement the revised customer tariff plan even if at the end of the day, the government is not going to fully pass it on to the customer, but it has to act fast to bring in liquidity to the market as this will save the sector from total collapse and attract new investments,” said Nwani.

 

NERC, in its report made the case that the DisCos are not remitting as much as they should from what is collected preferring to keep more for themselves.

 

“The liquidity challenge in the Nigerian Electricity Supply Industry (NESI) was further reflected in the DisCos’ remittances relative to Nigerian Bulk Electricity Trader’s and Market Operator’s invoices. In the first quarter of 2018, whereas DisCos were issued a total invoice of ₦163.1billion for energy received from NBET and for the service charge by MOs, only ₦51.2billion (31.4%) was settled by DisCos, creating a huge shortfall of ₦112.0billion.”

 

Shortfalls in the sector are believed to have risen about N1trillion making Nigerian’s electricity market illiquid.

 

NERC also said Nigeria’s foreign electricity buyers also owe heavily. “In the period under review, the total invoice issued to international customers (CEB/SAKETE and NIGELEC) and special customer (Ajaokuta) stood at ₦12.2billion,”

 

The commission said no payment was received from these customers.